Power of the Managed Service

By Nick King On Jan 8, 2019

The digital advertising industry is facing serious challenges as we enter the final months of 2018. Never before has distrust on all sides pervaded our industry to such an extent, with questions about how every element in the chain is making money, where ads are appearing and whether they are actually viewable.

The ANA report in the USA tipped many clients into deciding that they were no longer sure of the value or transparency of their agency. Recently, it was reported that 64% of brands in the US now have some form of in-house agency, whilst in the UK Vodafone and Lucozade have signaled their intention to take the digital media buying function entirely in-house.

While I can sympathize with clients questioning the status quo, I do wonder exactly what they hope to achieve from their ‘in-housing.’ Do they hope to get ownership of all elements of the buying process, from the technology stack through to buying the media via their own staff, or are they instead trying to regain control of the contract (with the technology) and just gain visibility on the buying process?

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Tech Control

If advertisers are looking purely to save money you only need to look at how many managed service companies have come and gone over the years to realize the challenge of building your own stack and executing it. There have been hundreds of companies all developing their own tech and it is not easy, but those that have survived execute to an extraordinarily high standard.

For a non-tech focused company to replicate this from the ground up would require a huge amount of investment. They could spend years developing their own tech or even just integrating 3^rd party technology into their own system. Whilst there are likely to be long-term savings, clients will almost certainly need investment in external skills from consultants to deliver these projects.

I believe many clients, when they realize the costs, will seek only to take on the contract with the vendor, thus, getting transparency of costs whilst still using an external resource either sitting in an agency or in their own office. However, given the investment that many managed service companies have undertaken, I also see clients leaning on them to deliver campaigns, especially where they have access to unique data and/or inventory.

Training

Building an internal buying team is a task that should not be underestimated. The recruitment, staffing and training of a team is an expensive and time-consuming venture. Especially with so many clients based outside of the media bubble that is London. Once they are in place there is also the challenge of managing and developing the team. In a media agency or supplier there is a clear career path and structure but offering this client side could be hard. I have met several people in the last few months who have gone in-house but lasted under a year, as the structure and culture is not in place. Never underestimate the value of an external resource that is contracted to deliver and thus maintain staffing levels and training.

Risk

Finally, anyone planning to completely ‘in-house’ their digital media activities needs to recognize that they are taking on 100% of the risk. In the past errors in delivery from incorrect pacing through to errors in targeting or just simply poor performance were worn by suppliers. Xaxis are promoting the option to buy through them based on outcomes whilst many managed service companies will take on the risk whether it is selling viewable or engagement metrics.

A CMO can question their agency or vendor if things go wrong but having to answer those questions from the board because they have an internal agency makes for a very different set of challenges.

Client Actions

Brands who are thinking of pulling their media buying capabilities in-house need to realize the scale of the technical task, the challenges of staffing and the risks involved. Those with the cash will be able to do it all, whilst many will likely take the contracts and relationships in-house whilst leaving everything else to a 3^rd party. In the context of this, it is vital to remember that progressive managed services have never been more transparent or more attuned to the needs of brand advertisers.